What happened when more money is injected into markets ?Take a look at this 3 line charts - SHCOMP, CN50 and HSI respectively. When 1.2 trillion yuan were injected into the markets, the 3 indices did a V shaped recovery almost instantly!
Currently, SHCOMP is in the lead, followed closely by CN50 and HSI with a fairly strong pullback.
The whole world is now watching how China central government will react on its monetary policies as being the world's 2nd largest economy, its action or inaction will have a severe impact on the global economy. The Chinese are the world's largest spenders when they travel and many hotels, restaurants, theme parks even properties are suffering (with some bemoaning they can only withstand for 3 months before they closed shops). This black swan event caught many by surprise and its pervasive and seemingly difficult to control has kept many world's leaders sleepless night.
If you are like me ,a long term investor of China and buy into the China story of it overtaking US in time to come, already with its technologies, this drop is a good opportunity to buy the indices or individual companies at a cheaper price.
We have yet to really see the impact of how these markets will be until the Q1 2020 GDP results are released. Many analysts are hoping this epidemic be contained and number of cases begin to reduce so that business can return to normal.
There are many lessons that we can learn from this event
1. How integrated and connected the global world has become and the importance of collaborating with one another to fight a common battle
2. Business Continuity Plan - When this event is over, I think more meetings will be held in boardroom to discuss how to prevent a disaster like this again. Eg. when business are overly concentrated in China, with 60-70% revenue generating from it will suffer drastically.
Other examples include the businesses that depend on China tourism - Cambodia casino , overseas hotels, restaurants, luxury properties, etc
3. Emerging opportunities - How the tech giants like Baidu, Alibaba, Tencent and others are leveraging on AI to help combat some of the challenges they faced in this crisis. Will this technology become an emerging trend that can be scale up in the future ?
Next, working from home - a yet to catch on concept in Asia, especially China - will it be the catalyst for change in the traditional 9 to 5 working environment ? If the government support this policy, then employees need to purchase properties that is near to subway or close proximity to their offices thus reducing on hefty mortgage loan. Working from home also introduce a whole set of new changes such as video conferencing, screen sharing, encryption of files sharing,etc. We can take a leaf from the European countries and adopt this work from home culture.
In short, as trader and investor, we must remain stay open to opportunities and not miss the woods by focusing too much on the trees within.
